Thimphu, June 16 - Indian Prime Minister Narendra Modi, affirming that a strong and prosperous India stood to benefit its subcontinental neighbours, Monday assured Bhutan that his regime would fulfil all commitments made by its predecessor and announced major trade concessions for the landlocked nation.

Wrapping up his two-day official visit to Bhutan, his first abroad after he assumed office last month, Modi stressed the need for forging closer bilateral ties in tourism, hydropower and proposed an annual hill sports festival involving India's northeastern states alongside Bhutan and Nepal.

In a joint statement issued at the end of the visit, Bhutan agreed with India not to allow each other's territory to be used for interests inimical to the other.

Addressing a joint session of Bhutan's parliament, Modi, who arrived here Sunday, said if India progresses, it will directly impact the development of its neighbours.

Stability and development in India will help neighbours like Bhutan, he said during a rousing speech which he delivered extempore in Hindi.

Modi's speech, which touched on a wide range of issues concerning South Asia and India-Bhutan relations, was heard in rapt attention by Prime Minister Tshering Tobgay, his orange robed ministerial colleagues and other MPS who wore blue robes.

Such was the impact of the address that the gathering broke into spontaneous applause in a nation where clapping is viewed - and resorted to - as the gesture to ward off evil spirits.

Modi said a change of government in India would not have any impact on the close ties between the two neighbours, and affirmed his regime would fulfil all commitments made by the UPA regime.

In a bid to further improve the ties, India announced its decision to exempt Bhutan from any ban or quantitative restrictions on exports of items like milk powder, wheat, edible oil, pulses and non-basmati rice.

Terrorism divides and tourism unites, Modi said, and suggested the two countries formulate a joint policy for a tourism circuit by tapping Bhutan's rich resources and India's capabilities.

He assured Bhutan of India's support in its development, saying: If you walk two steps ahead, we too feel like walking another step forward and supporting you.

He said that India wanted to take forward its hydropower cooperation with the Himalayan country in a major way and also equip its youth with technology to be able to match strides with others in the world.

Modi announced doubling of the Nehru-Wangchuck scholarship to Rs.20 million per year. India will also provide grant assistance for establishment of the digital section/ E-library in the National Library of Bhutan and in all 20 districts of Bhutan.

Modi said Indian states in the northeast had similar tastes and habits like the two Himalayan countries Nepal and Bhutan.

Why can't we hold a special hills festival? We can hold an annual sports meet. Through sports, we can connect the people. Sports brings sportsman's spirit, which contributes to happiness, he said, and asked the Indian states, as also Bhutan, to think over the proposal.

Later, he unveiled the foundation stone of the 600 MW Kholongchu hydropower project, a joint venture model between Satluj Jal Vidyut Nigam and Druk Green Power Corporation. Construction on the project is expected to start later this year.

Modi then watched a brief cultural programme before Bhutan King Jigme Khesar Namgyel Wangchuck hosted a lunch in honour of the visiting leader and his delegation, before they departed from Thimphu.

This visit has been extremely successful and entirely satisfying. It has reinforced and further strengthened Indo-Bhutan ties, said External Affairs Minister Sushma Swaraj.

Modi was given a warm send off by Tobgay and a number of his cabinet colleagues at the Paro airport.

In scenes similar to Sunday, when he arrived in Bhutan, common people, including a large number of children, lined up a major part of the Thimphu-Paro route waving Indian and Bhutanese flags.

Moved by the gesture, Modi halted at two spots and interacted with the children and talked to Bhutanese people at a throbbing market and posed for photos.

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